Pete G. Peterson will be bringing together a whole flock of like-minded so called deficit hawks to attend a “national fiscal summit.” Don’t be surprised when it turns into a push by a group of millionaires to cut Social Security and Medicare in the name of fiscal responsibility. But if as a nation we really want to get a grip on our deficit the best solution is to expand Medicare, not cut it. Switching to a Medicare for all system, or even just providing everyone with an open Medicare buy-in option would reduce the deficit by hundreds of billions of dollars over the next decade.

Private health insurance is incredibly wasteful and simply not a cost effective way to provide people with health insurance. Not only as a nation do we spend almost twice as much per capita on health care, but within this country, we pay way more to private health insurance companies to serve a function that Medicare can do for less.

Based on information from a wide range of sources, including, the CBO, the CMS , and even the UnitedHealth Group-owned Lewin Group, Medicare is roughly 15-30% cheaper than private insurance for providing the same level of coverage. Given that health care costs are roughly 16% of our GDP, and the tax exemption for employer-provided health insurance is the largest tax exemption in the system, really bringing down health care costs would dramatically reduce our deficit.

According to the Joint Committee On Taxation, the exemption for employer-provided health insurance cost the government $246.1 billion in 2007. For the four year time span, FY2009-FY2012, the exemption was projected to cost $1.228 trillion.

From the debate over the excise tax, we learned that the CBO and JCT believe any reduction in the cost of health care from an employer would result in an equal value increase in taxable income for the employees. While I may despise the logic of the finding, we know that is how the CBO officially projects the affect of changes in the cost of health care.

So, based on this, what would happen if we passed a law forcing all employers buy health roughly the same level of insurance from a cheaper Medicare-like public program instead of private insurance companies?

Insurance costs would go down 15-30%, and the CBO would project the government to net roughly $45-90 billion a year in increased tax revenue from higher wages. Since the cost of Medicare has grown at a slower rate than private insurance, those savings should increase moving forward. Of course, some employers, because they are getting cheaper insurance, might choose to offer better coverage, so that might slightly reduce the increased tax revenue. Also, if the new health care law were changed so that people had to buy into Medicare instead of being forced to buy private health insurance on the new exchanges, the amount of tax credits we would need to provide to make health insurance equally as affordable would be reduced by over $150 billion between now and 2019.

Overall, forcing all employers to buy insurance through a Medicare-for-all system and replacing the new health care exchanges with a Medicare buy-in would probably be projected by the CBO to reduce the deficit by close to $1 trillion over the next decade based on some simplified calculations. Improving Medicare cost effectiveness by allowing direct drug price negotiation and drug re-importation would further help reduce the federal deficit by billions more.

Fully open buy-in for a Medicare-like program

If people though forcing people under 65 to switch to Medicare is too dramatic a step to take toward solving our deficit issues, simply providing every individual and business with the option of buying into Medicare would easily reduce the deficit by hundreds of billions over the next decade. I suspect probably no more than a 40% of employers would switch to Medicare, but that would probably be the 40% of employers who were most overpaying private insurance companies and would save the most. Combine that with the over $115 billion a Medicare buy-in-like public option would reduce the cost of the new health care law. A Medicare buy-in open to everyone would probably be projected to reduce the deficit by half-a-trillion or more over the next ten years.

I bet the progressive deficit-reducing solutions–drug re-importation, direct Medicare drug price negotiation, Medicare for all, and/or a fully open Medicare buy-in–would be projected by the CBO to reduce the federal debt more than any set of proposals to cut benefits to senior citizens put forward by Pete Peterson’s gang of “deficit hawks.”

What progressives should do is put forward a better deficit reduction plan

The President’s deficit commission will probably offer some package of regressive tax increases (think VAT) and cuts to Medicare and Social Security that will make the millionaire deficit hawks in Peterson’s gang happy. Progressives should put forward their own (and probably much larger) deficit reduction plan based on Medicare buy-in and reforming Medicare Part D. They should then demand that the progressive solution of Medicare buy-in be part of any deficit reduction plan as prerequisite before even considering cutting any standard senior citizens benefits. Also throw in demanding an end to two incredibly expensive foreign occupations, and cuts to unneeded defense spending programs for good measure.

If millionaires want to go around complaining about deficits, they should first cut the fat off of massively wasteful private health insurance and PhRMA corporate welfare programs before they start trying to take cash out of the pockets of old people on fixed incomes.

Note on calculations: These numbers are not how much I think a well designed single payer system or a Medicare-like buy-in would actually reduce our federal deficit. These are rough estimates of what the all-important CBO scores would likely be, based on what I know about how the CBO calculated health care changes.

Nor would I, if designing a Medicare-for-all system, require employers to buy coverage from Medicare for their employees–that was just a simple way to design it to make it easy to infer the likely CBO score.

Jon- reminder CBO estimates are based upon savings from Medicare cuts — like the $250 billion-ish in provider cuts– that are not going to happen… and those same cuts are used to provide subsidies. That, according to the administration’s best health care number crunchers at the HHS CMS Actuary.

You can try to sell single payer or public options on other grounds, but not on ‘savings’ that rely on the same fiscal legerdemain that we watched Goldman Sachs dance around yesterday.

Nor would I, if designing a Medicare-for-all system, require employers to buy coverage from Medicare for their employees–that was just a simple way to design it to make it easy to infer the likely CBO score.

To off-set this:

So, based on this, what would happen if we passed a law forcing all employers buy health roughly the same level of insurance from a cheaper Medicare-like public program instead of private insurance companies?

Laws that force people to buy things sound like mandates.

BTW, I think that second quote is broke. “employers buy health roughly the same”

A very small point, afaik, Medicare subsidizes the extravagant cost of Medical School education. Not sure why this burden is on the taxpayers. Students who get accepted to Medical schools are the best and the brightest. I am not sure why their education is so expensive.

remember that overhead claims are not comparing ‘apples to apples’ (and there is kaiser data to back this up).

if you really want to make a claim about ‘saving money’ — force everyone onto Medicaid — that system is much cheaper than Medicare AND private insurance, and is why the HCR law dumped 16 million people into a failed, second class system that will not even be covering mammograms for women aged 40-49.

so- if you’re going for savings, go all the way with your posts — Medicaid is government run AND demonstrably much cheaper than Medicaid.

Aetna, Humana, Cigna, and the rest of the cartel use Medicare and Medicaid to socialize their losses onto the taxpayers. They do not want to provide coverage for people who need Medicare or Medicaid, because there is no profit in it. The cartel is a true economic parasite. It wants to skim the profits from premiums from the young and the healthy. Those premiums should be saved to pay in later life for hospitals, physicians, nurses, allied health professionals, Big Pharma, and medical device makers. Unlike the health insurance cartel, those groups actually provide value to patients.

would like to see the references and any caveats they make when they make their claims — again, your CBO reference, unless you can provide another, is based upon the full Medicare cuts– provider AND benefit– actually happening… without those ‘savings’, the benefit more than disappears.

Why are you not supporting Medicaid for All if saving money is the key and public option is the really best way to go? Medicaid exists… we could easily transition all Medicare beneficiaries on to Medicaid in no time.. and then really save the government some money?

Am I missing something about the logical conclusion for your goal of ‘reducing the deficit’?

I think you are correct, but I think you also have to combine that with education about the difference between the PAPER economy and the REAL economy, the part that makes stuff, and creates jobs. We have, afaik, hundreds of trillions invested notionally in credit swaps. AFAIK, those alone dwarf all the entitlement programs and a lot of the infrastrcture and R&D investment we need.

Deficit messaging helps on some issues, it hurts us on others. I think the messaging is very tough.

Small point, but: Don’t “FORCE” employers to switch to Medicare. Just GIVE Medicare to everybody, and pay for it with a new/increased payroll tax. Let the employers decide for themselves if they want to cancel their other insurance plans.

Also, it has to be everybody. If Medicare is offered as an option, employers and private insurers will game the system, by pushing their oldest, sickest and most expensive patients over to Medicare, and keeping their younger, healthier, and most profitable ones.

To cut current deficits without first rebuilding the economic engine of the private credit system is a sure path to stagnation, to a double-dip recession–even to a second Great Depression. To focus obsessively on cutting future deficits is also a path that will obstruct, not assist, what we need to do to re-establish strong growth and high employment.

To put things crudely, there are two ways to get the increase in total spending that we call “economic growth.” One way is for government to spend. The other is for banks to lend. Leaving aside short-term adjustments like increased net exports or financial innovation, that’s basically all there is. Governments and banks are the two entities with the power to create something from nothing. If total spending power is to grow, one or the other of these two great financial motors–public deficits or private loans–has to be in action.

For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in “net financial wealth.” Ordinary people benefit, but there is nothing in it for banks.

And this, in the simplest terms, explains the deficit phobia of Wall Street, the corporate media and the right-wing economists. Bankers don’t like budget deficits because they compete with bank loans as a source of growth. When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over–a house or factory or company–that will then become the property of the bank. It’s easy to see why bankers love private credit but hate public deficits.

All of this should be painfully obvious, but it is deeply obscure. It is obscure because legions of Wall Streeters–led notably in our time by Peter Peterson and his front man, former comptroller general David Walker, and including the Robert Rubin wing of the Democratic Party and numerous “bipartisan” enterprises like the Concord Coalition and the Committee for a Responsible Federal Budget–have labored mightily to confuse the issues.

Thinly disguised as a program for “deficit reduction,” the proposed commission will meet its first test today, when the Senate may vote to authorize it as part of a bill to raise the national debt ceiling. A large progressive coalition is already on record against it. But the progressives’ case is flawed; it’s not tough enough. Here’s why.

According to a press release issued by the Campaign for America’s Future on January 20, describing the progressive coalition:

Speakers stressed the need for a long-term deficit reduction strategy…. Joan Entmacher of National Women’s Law Center noted that responsible ways to cut the deficit were available now if austerity activists weren’t only interested in attacking Social Security and Medicare…. Hillary Shelton of the NAACP said the responsibility for debt reduction should remain with democratically elected representatives from each congressional district…

Now, when our civil rights leaders speak of deficits, no one supposes they do so from deep conviction. It’s a political move. They are intoning phrases calculated to lend a tone of respectability to a larger and more important cause. That cause — in this case protecting Social Security and Medicare from predators on Wall Street — is a good one. But good political purposes don’t guarantee good economics. And, let me argue, if the economics are based, as they are here, on a false premise, then you can’t make the politics work in your favor.

The CAF coalition concedes that “long-term deficit reduction” is vital. But why? No reason is given. Are they worried about a threat of inflation? If so, why not look at interest rates? Last December’s average 20-year Treasury bond rate was 4.40 percent — lower than it was before the crash sent deficits soaring. Clearly, the markets aren’t worried — or the government would have to pay more to borrow. Equally obviously, the markets aren’t worried about “default” or “national bankruptcy” either. Investors know those concepts don’t apply to the government of the United States.

IF our country wanted to truly improve our health care system, we would have expanded Medicare for Everyone. In spite of all the rhetoric about improving the health insurance reform bill in the future and how it is just “a first step”, the reality is that the insurance companies are now entrenched in our system for decades and the profits they will make (thanks to a bill written by AHIP and the heritage foundation)assure that very little will change in favor of citizens.

The messaging from the neo-liberal agenda is to have President Obama talk repeatedly about reducing the deficit and reducing taxes in order to “convince” people it is in their best interests to do so (why else would a “Democrat” suggest such a thing?). In reality, it is the corporate and ruling elites agenda which I hope “we the people” will eventually realize.

I would also like to add that any “fiscal summit” meeting which takes military spending “off the table”, loses credibility. This is simply a meeting to reduce “entitlement” spending and privatize those expenditures.

You know what else would cut the deficit. TAX THE RICH! TAX THE BANKERS AND PLUTOCRATS WHO GOT US INTO THIS MESS! TAX THE OIL COMPANIES WHO WE WENT TO WAR FOR!!!

Sorry, but it’s SO F*#&ING OBVIOUS.

These “deficit commissions” are so full of it. This narrative that the deficit is Out Of Control because of health spending or social security or the stimulus are such OUTRIGHT LIES that it makes my stomach hurt.

The reason the “trust funds” are empty is that we spent that money on tax cuts for the rich and fighting two wars. Then, on top of that, we bailed out the criminals who stole half of our parents’ retirement funds.

Every time I get an email from the Concord Coalition I send a reply reminding them that the only reason I’m on their email list is because I BEGGED them to stop the Bush tax cuts. They didn’t say a peep then.

“DEFICIT REDUCTION” is a LIE. The way to cut deficits is to tax the billionaires. They own everything. It’s time to tax the oligarchs and bring back the middle class in this country.

Yes, Medicare for all is a good idea. But frankly, it obscures the real issue, which is that the rich need to be TAXED AND TAXED AND TAXED.

The AMA is slowly realizing that Physicians Assistants are a needed part of medical care delivery. There are more options for who delivers care at the upper end of the hierarchy – I first saw it with Nurse Practitioners about 15 years ago, and now PAs at about the same level. I think both NP and PA have post graduate training, just not as broad as the MDs that supervise them.

Thank you, Selise…although, judging from the posts here, the economic reality of the situation isn’t going to get much traction politically, on the left or the right. It’s just too counterintuitive, I guess. People are looking at our situation as if our currency is still tied to a commodity.

I don’t understand why we insist on preserving the private for-profit health insurance industry. It is counter to our nation’s economic health. HCR has set the stage for improving the fiscal reality of our health care system, but we have to go the one final step to get there.

Medicare for All is the fast path to achieving affordability. Honestly, why do we continue our foolish stubborn attachment to a health care delivery system that costs us 25% more than Medicare for All. It’s not that for-profit is just more expensive than a government alternative; it makes us globally uncompetitive. You want a jobs program that works? Give us Medicare for All. Is the ideology of “No Big Government” worth the cost of hundreds of thousands, maybe millions, of American jobs? We are fools for perpetuating the No Big Government ideology? I, for one, prefer Big Government over Big Health Insurance. Give Americans the choice of buying Medicare Insurance. Give us a choice with integrated drug and supplemental coverage. And offer the integrated product to seniors too. We all would benefit.

To enable our choice, give us Free Choice Vouchers, vouchers issued by employers, that employees can use to purchase Medicare or for-profit insurance on the Exchange. Give employees the choice of selecting their employer’s health plan or getting vouchers of value equal to their employer’s portion. Give employers the choice of issuing Free Choice Vouchers to all their employees in place of purchasing an employee health plan. Pay for the Voucher system via a small per voucher fee paid for by employers.

Nothing I am proposing would be mandated. It is all about increasing choices. These changes would cost the US gov’t and thus the taxpayer nothing. And it would drive the overall cost of US health care down substantially. And in the bargain, we would move to greater individual choice and increased portability of health insurance. Fight for Medicare for All and Free Choice Vouchers in time for 2014 implementation.

Sorry – but there is a massive overhead difference between private insurance and Medicare (which uses private insurance as claim administrators under 2 year contracts that are put out for bid and average about 3% overhead costs).

The Kaiser comments are smoke and mirrors – check out Society of Actuaries studies over the years on this topic.

But of more importance is the existence of the State of Maryland and its hospital controls that by law set the markup over cost of things provided – a 21% number that compares with 320% in New Jersey where for-profit hospitals charge a bit more for care that is not really the quality that Maryland’s JohnsHopkins provides for so much less.

The Maryland model was adopted in a few other state in the 70′s and worked well, but in the Reagan greed is good years the Hospitals convinced their state governments to get rid of those max mark-up for overhead rules for hospitals.

Bet you Maryland is not even a foot note in the deficit reduction report.

A fair approach is forgiving all doctors for all school loans, and then setting max prices for the nation for standard operations, with rule for non-standard operations and care be charged at rates that reasonably reflecting the pricing of the listed operations and types of care. Yes – this is government control – and it works.

I should note that ins company contracts are at 15 to 20% overhead for larger groups, 25% for smaller groups, and 30 to 35% for individual. Medicare runs a bit over 3% with almost all of that the overhead they pay the ins co’s. 96% of Medicare money makes its way to the provider of care.

Now because of the new HR bill and its claim payment ratio requirements of 80% and 85%, the ins companies are planning to use accounting pretend to avoid giving better value for your premium – as would seem to be required by the law – by calling the CEO bonus and such part of the actual claims paid number – saying they are a claim payment expense. Wellpoint has already moved 0.5 billion from Vice President and CEO costs to claim payment costs. The providers still only get 70 cents of the premium dollar paid.

The point is to complete discredit the deficit hawks by show that they really don’t at all care about the deficit by offering them up real solutions they reject.

i’d rather discredit them by showing they are full of shit first. and then as icing on the cake, show that they don’t believe their own lies — ie, that they are not mislead or wrong. they are lying to us.

arguments based on accepting their premises, without first showing the premise is nonsense, reinforces the lies we’ve been told for at least 40 years.

time to tell the truth to the american public. and there’s not much time left.

yes, but the much larger and more important point is to show that no one should care about the deficit because it doesn’t have anything to do with fiscal sustainability, fiscal responsibility, or fiscal reform. See:

Yes, its a mandate. Of course, its an employer mandate (as used in several nations with universal health insurance), rather than an individual mandate, as in the RomneyCareForAll bill that passed the Congress.